On the revenue side of things, your accounting manual should include how you handle billing, cash receipts, and accounts receivable.
The billing function will vary based on what kind of revenue sources you have. If you have multiple sources, write up the process for each of them, and who’s responsible for each step. Some details to include are:
- What reports you use to prepare bills, e.g. a price list for products you sell, expense details for cost-reimbursement contracts, a checklist of deliverables that have been met for performance-based contracts
- The steps you use to prepare the invoice, post the revenue in your accounting system, and deliver the invoice to the customer or funder
- The timing of when you prepare invoices, e.g. by the 7th day of the month for work done in the previous month
For cash receipts, you should document how payments are received (e.g. ACH payments, checks, credit card payments), any differences in how each payment method is processed, and how duties are segregated for internal controls. Some details to include are:
- Who opens mail and reviews the checks received
- How you get payment information from your credit card processor, if you use one
- Who reviews bank activity to locate ACH payments received
- Who records payments in your accounting system
- Who prepares deposits
- Who makes deposits, and how they’re made, e.g. going to the bank, electronically, using a lockbox service
- The review process to make sure the deposit slip from the bank ties to the cash receipt report in the accounting system
You should also document accounts receivable practices that are less transaction-driven, such as:
- A monthly review of the aged accounts receivable balance
- Identifying past-due accounts and how you follow up on late payments, e.g. when customers or funders are 30, 60, or 90 days late in paying a bill
- Evaluating whether to write off an old balance, or give a credit or refund, including any approvals that are needed and how they’re posted to the customer’s account
Check here for additional topics to cover in your accounting manual.